Lots of adjuncts have written to me in recent months about the seeming impossibility of saving for retirement or other long-term financial goals, given their income. Of the myriad perks afforded to full timers, institution-sponsored retirement plans shine the brightest. Under many of these plans, colleges make contributions to the employee retirement accounts beyond that invested by the employees themselves.
What a beautiful dream. The vast majority of adjuncts have no retirement accounts whatsoever from their institutions. Adjuncts are hired in droves precisely because the institutions don't have to offer us such benefits. So, once again, we adjuncts are on our own. Given this hard reality, how can adjuncts expect to save any money for a retirement nest egg?
The first thing to keep in mind is that we are not being singled out by the universe for special persecution. Millions of American workers have no employer-sponsored retirement plans, and, just like them, we adjuncts must take responsibility for saving for retirement, even if Social Security remains solvent. And as anyone from Enron will tell you, having a company-sponsored plan is not a foolproof safety net. We must simply find ways to play the cards we are dealt, short of getting out of the adjunct game altogether.
Adjuncts can begin to build a retirement nest egg with just a handful of basic money-management strategies. Before I go on, I should stress that I am not a financial planner and that the information in this column is not a substitute for that provided by legal or accounting professionals. You should always consult the pros in money management. I'm not one of these pros. I have learned from such pros, however, a few basic principles that I am safe in sharing with you here.
The constant mantra of money management advisers is this: Save, save, save. I don't care how little you earn, to have any left to live on when you're old, you have to save some of it now instead of spending it. It's as simple as that. Period. Really. No kidding. Do the math. If you save it, you have it; if you spend it, you don't have it.
I can already hear the barrage of protest: Well it's easy to save, you say, when you make a decent salary. But we adjuncts don't make any real money to speak of, so how can we be expected to save?
Nobody "expects" you to do anything. As Eric Tyson says in Investing for Dummies, thinking that we can't save because we have a modest income is a "crutch" way of thinking. We tell ourselves we can't save, and thereby justify spending all our money. Don't fall for it; change your thinking. So, how can you start saving money on a modest adjunct salary?
Start by tracking your expenses. Take a week, or ideally, a full month and write down every cent you spend -- everything, from the big bills like rent to the small ones like a plain coffee at the corner store. Most people have no real idea where their money goes, but through this exercise, you will. Significant chunks of our monthly income drain away day by day, week after week, in little, seemingly insignificant ways. The only way to raise your awareness of this in your own financial life is to track your spending and see exactly where your money is going. Once you do this, you can begin to cut some of that spending and funnel it to retirement savings.
I remember the first time I did this. I was still in graduate school, and working as an adjunct as I finished my doctorate. Like everyone else in my position, I was poor. I tracked my spending and realized, to my surprise, that I was spending a lot of money on gourmet iced coffee. I live in Houston; it's the freaking tropics down here, and you stay groggy and soggy and hot. So, I bought a $3.50 iced coffee nearly every weekday afternoon to give me that punch I needed when the temperature was at its highest and I was at my lowest. Well, I did the math on that and saw that my daily coffee fix cost me about $17.50 a week, $70 a month, $840 a year.
I had no idea I was drinking that away every day until I tracked my expenses. That was nearly 10 years ago, and I can count on two hands the number of gourmet coffees I've bought since then. I just decided that I would put that money to better use, and would brew my own cheap, generic iced coffee at home and carry it in a thermos if I needed it.
You have to find the small money drains in your monthly budget, and plug those holes. It may not be coffee. Maybe it's a daily newspaper, or monthly cable TV, or too many magazine subscriptions, or too many new book purchases. Maybe you eat out when you could pack a lunch, go to movie theaters when you could rent videos, buy brand-name products when generic ones would do. Track your spending and learn your true financial self. Then make a firm decision to save instead of spend.
Well, you can't retire on $70 a month, you might say. True, especially if you don't start saving that $70 a month starting right now. But, here's the catch. Through the magic of compound interest, $70-a-month contributions to a retirement account can add up to a lot more. Go to the Web and plug in this amount to any of the savings calculators (Fidelity.com, Vanguard.com, and troweprice.com all offer such tools): $70 a month, earning the 11-percent average that the stock market returns over time, will grow to more than $13,000 within only 10 years. And it will only go up from there. Many of us working as adjuncts have far more than 10 years until retirement, and that just gives our $70 contributions more time to grow.
The good thing is that a plethora of investment opportunities await you and your $70 a month. In fact, TIAA-CREF, the higher-education pension giant, offers the full range of its retirement products to anyone -- not just full-time faculty members -- who agrees to an automatic direct deduction of $50 a month from a checking account. In addition, the biggest investment names in the business, including Vanguard, T. Rowe Price, Merrill Lynch, Janus, and others will set you up in minutes with a $50-a-month direct debit. And then you're on your way. Send for the piles of free information they all offer, read through it and decide which kind of retirement investment makes sense for you.
But, do it now.
I can't, you might say. I have too many other bills. Well, another major principle of money management is, Pay yourself first. Make a commitment to yourself, that you are your first priority, that your financial future is a priority -- and then put yourself first in line to receive your own money. Yes, you have to pay your bills. Yes, you have to meet your financial responsibilities to others. But your first responsibility is to yourself. And when you set up that monthly automatic debit, you are paying yourself first and making yourself one of your "major bills." Truth is, when you do this, many of the unnecessary expenses in your monthly budget will slide away. Adopting this policy, by its nature, helps plug money drains in your life.
No good reason exists for adjuncts to not begin saving for retirement. Granted, $50 a month is modest and you will have to bump up your savings eventually to cover yourself in later years. But, it's a healthy start and it's totally feasible as a savings plan on the modest adjunct salary. Just start. Don't let the low income that academe pays you freeze you out of some share of financial security.